EGL Agrees to $1.7B Buyout by CEO-Led Group

Reuters

Tuesday, 20 Mar 2007 | 10:16 AM ETReuters

SHARES

Shipping company EGL said on Monday it agreed to be bought by an investor group led by CEO James Crane for $38 per share, or around $1.7 billion, in Crane's second attempt to take the company into private ownership.

The offer, while higher than his original bid, is below a $40 per share offer by private equity firm Apollo Management, according to a memo obtained by Reuters on Monday.

Apollo thought final bids were due on March 26 and hurried to submit its offer over the weekend when the company received news of the agreement with Crane, the memo says. Apollo said in the memo that its $40 per share bid expires on March 23.

EGL shares were up 5% on Monday, then jumped another 1% after the Reuters report about Apollo's offer.

That offer came after the signed agreement with Crane's group, a source close to the process said on Monday. The company and its advisers are expected to look closely at another offer for the company, the source said.

Management-led buyout offers, or deals in which executives are among the buyers and plan to stay in control of the company, are on the upswing, fueled in part by the amount of private equity money available to invest alongside the deals.

Executives usually back such buyouts as a way to grow the business in private and focus on long-term goals, free of Wall Street's short-term pressures. These deals also invite scrutiny because the company is pressed to evaluate the best offer, even as its management is the one presenting the bid.

EGL, a Houston-based supply chain management company, agreed to be bought by a group comprising of Crane, who is also EGL's largest shareholder; private equity firm Centerbridge Partners; and Woodbridge, an investment group formed by Canada's Thomson family.

The deal is expected to close in the second or third quarter. Apollo pledged to push on with its offer. "It is clear that your previously announced process ... was not intended to obtain superior value for shareholders," said the Apollo memo, addressed to EGL's bankers and lawyers. "Rather, it was designed to "legitimize" a transaction with Mr. Crane by soliciting bids from third parties ... without providing them with adequate or customary information."

The memo goes on to complain that Apollo's efforts to obtain information for diligence were ignored.

Under the deal with the Crane-led group, EGL shareholders will receive $38 per share, $2 more than Crane's previous buyout proposal in December. The Houston-based company said the price represents a 27% premium over its shares' $29.78 closing price on Dec. 29, the last trading day before the original proposal.

The original $36 per share bid by Crane, with backing from General Atlantic fell apart in February after his partner backed out due to weaker-than-expected fourth-quarter results at EGL.

Management-led buyout offers, or deals in which executives are among the buyers and plan to stay in control of the company, are on the upswing, fueled in part by the amount of private equity money available to invest alongside the deals.

Executives usually back such buyouts as a way to grow the business in private and focus on long-term goals, free of Wall Street's short-term pressures. These deals also invite scrutiny because the company is pressed to evaluate the best offer, even as its management is the one presenting the bid.

Apollo's $40 per share offer is subject to due diligence and a public company merger agreement, the memo says, and expires by the close of business on March 23.